a new champion for global health · 2019-07-29 · 7. a new champion for global health +...
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A New Champion for Global Health
July 29, 2019
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+Safe Harbor Provision This communication contains “forward-looking statements”. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements about the proposed transaction, the expected timetable for completing the proposed transaction, the benefits and synergies of the proposed transaction, future opportunities for the combined company and products and any other statements regarding Pfizer’s, Mylan’s andUpjohn’s future operations, financial or operating results, capital allocation, dividend policy, debt ratio, anticipated business levels, future earnings, planned activities, anticipated growth, market opportunities, strategies, competitions, and other expectations and targets for future periods. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “intend”, “continue”, “target”, “outlook” and variations of these words or comparable words. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; changes in relevant tax and other laws; the parties’ ability to consummate the proposed transaction; the conditions to the completion of the proposed transaction, including receipt of approval of Mylan’s shareholders, not being satisfied or waived on the anticipated timeframe or at all; the regulatory approvalsrequired for the proposed transaction not being obtained on the terms expected or on the anticipated schedule or at all; inherent uncertainties involved in the estimates and judgments used in the preparation of financial statements and the providing of estimates of financial measures, in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) and related standards, or on an adjusted basis (“Non-GAAP measures”); the integration of Mylan and Upjohn being more difficult, time consuming or costly than expected; Mylan’s and Upjohn’s failure to achieve expected or targeted future financial and operating performance and results; the possibility that the combined company may be unable to achieve expected benefits, synergies and operating efficiencies in connection with the proposed transaction within the expected time frames or at all or to successfully integrate Mylan and Upjohn; customer loss and business disruption being greater than expected following the proposed transaction; the retention of key employees being more difficult following the proposed transaction; Mylan and Upjohn’s capacity to bring new products to market, including but not limited to where it uses its business judgment and decides to manufacture, market and/or sell products directly or through third parties, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts (i.e., an “at-risk launch”); the scope, timing and outcome of any ongoing legal proceedings and the impact of such proceedings on Mylan’s and Upjohn’s consolidated financial condition, results of operations and/or cash flows; Mylan’s and Upjohn’s ability to protect their respective intellectual property and preserve their respective intellectual property rights; the effect of any changes in customer and supplier relationships and customer purchasing patterns; the ability to attract and retain key personnel; changes in third-party relationships; the impacts of competition; changes in the economic and financial conditions of the business of Mylan or Upjohn; and uncertainties and matters beyond the control of management and other factors described under “Risk Factors” in each of Pfizer’s and Mylan’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the SEC. You can access Pfizer’s or Mylan's filings with the SEC through the SEC website at www.sec.gov or through Pfizer’s or Mylan's website, and Pfizer and Mylan strongly encourage you to do so. Except as required by applicable law, Pfizer, Mylan or Upjohn undertake no obligation to update any statements herein for revisions or changes after the date of this communication.
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+Safe Harbor Provision
ADDITIONAL INFORMATIONThis communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended (the “Securities Act”). In connection with the proposed combination of Upjohn Inc. (“Upjohn”), a wholly owned subsidiary of Pfizer Inc. (“Pfizer”) and Mylan N.V. (“Mylan”), which will immediately follow the proposed separation of the Upjohn business from Pfizer (the “proposed transaction”), Upjohn, Mylan and Mylan I B.V., a wholly owned subsidiary of Mylan, (“Mylan Newco”) intend to file relevant materials with the Securities and Exchange Commission (“SEC”), including a registration statement on Form S-4 that will include a proxy statement/prospectus relating to the proposed transaction. In addition, Upjohn expects to file a registration statement in connection with its separation from Pfizer. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENTS, PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MYLAN, UPJOHN, MYLAN NEWCO AND THE PROPOSED TRANSACTION. A definitive proxy statement will be sent to shareholders of Mylan seeking approval of the proposed transaction. The documents relating to the proposed transaction (when they are available) can be obtained free of charge from the SEC's website at www.sec.gov. These documents (when they are available) can also be obtained free of charge from Mylan, upon written request to Mylan, at (724) 514-1813 or investor.relations@mylan.com or from Pfizer on Pfizer’s internet website at https://investors.Pfizer.com/financials/sec-filings/default.aspx or by contacting Pfizer’s Investor Relations Department at (212) 733-2323.
PARTICIPANTS IN THE SOLICITATIONThis communication is not a solicitation of a proxy from any investor or security holder. However, Pfizer, Mylan, Upjohn and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of Pfizer may be found in its Annual Report on Form 10-K filed with the SEC on February 28, 2019, its definitive proxy statement and additional proxy statement relating to its 2019 Annual Meeting filed with the SEC on March 14, 2019 and on April 2, 2019, respectively, and Current Report on Form 8-K filed with the SEC on June 27, 2019. Information about the directors and executive officers of Mylan may be found in its amended Annual Report on Form 10-K filed with the SEC on April 30, 2019, and its definitive proxy statement relating to its 2019Annual Meeting filed with the SEC on May 24, 2019. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants will also be included in the proxy statement/prospectus when it becomes available.
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+Executive Commentary
Robert CouryChairman, Mylan
Albert BourlaCEO, Pfizer
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A New Champion for Global Health
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• New Management: Robert J. Coury (Executive Chairman); Michael Goettler (CEO); Rajiv Malik (President)
• New Board: 13 directors (Chairman, CEO, 8 Mylan Appointees, 3 Pfizer Appointees)• NewCo will be domiciled in the US and incorporated in Delaware• NewCo will have three Global Centers: Pittsburgh, Shanghai and Hyderabad• Combined Board will fully declassify by 2023 annual meeting
Corporate Organization
• NewCo to have lower leverage ratio than Mylan standalone‒ ~$24.5bn of total debt, including $12bn of gross debt for Upjohn to fund $12bn pre-
closing cash payment to Pfizer• Solid investment grade credit rating with stable to positive outlook expected• Company will pay a dividend; ≥ 25% target payout of free cash flows
Capital Policies
• Pfizer shareholders to own 57% of the combined company• Mylan shareholders to own 43% of the combined company
Ownership
• Mylan and Upjohn combining in a Reverse Morris Trust transaction, expected to be tax-free to Pfizer shareholders
• Mylan shareholder vote required; no shareholder vote required for Pfizer• Transaction is subject to customary closing conditions, including receipt of regulatory
approvals, and is currently expected to close in mid 2020
Deal Terms
Transaction Summary
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+A New Champion for Global Health
Accelerates shared commitments to expand access to medicine
Capable of meeting the world’s diverse therapeutic needs and meeting evolving health needs
Leader in treating communicable and non-communicable diseases
Good for patients, payors, governments and health systems
New Name to be Announced Before ClosingUpjohn Name to be Used in China and Select Emerging
Markets
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+A Powerful Combination
Diverse Portfolio Across all Key Therapeutic Areas
NewCo
Focused on Delivering Shareholder Value and High-Quality Governance
Strong Footprint in US and Europe
Best-in-Class Global Manufacturing and Supply Platform
Sustainable Pipeline Engine
Sustainable, Diverse and Differentiated Portfolio and Pipeline
Enhanced Global Scale and Geographic Reach
Powerful Combination of Best-in-Class Capabilities with World
Class Management Team
Strong and Sustainable Cash Flows Enabling Strong Return
of Capital
Trusted, Iconic Off-Patent Brands
Unique Footprint in Asia and the Emerging Markets
Best-in-Class Global Commercial Capabilities
Strong Cash Flow and Pfizer’s Shareholder Friendly
Capital Allocation
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~$1bnExpected Annual Cost
Synergies by 2023
Compelling Financial Profile
≥ 25%of Free Cash Flow to Be Paid as DividendBeginning First FullQuarter After Close
≤ 2.5xGross Leverage, Targeted by the
end of 2021
$19 - 20bnExpected Revenue
$7.5 - 8.0bnExpected Adjusted EBITDAwith a margin of ~40% including
phased synergies
> $4bnExpected Annual FCF
Commitment to Solid Investment Grade Profile, Maintaining Strategic Flexibility and Delivering Shareholder Friendly Capital Returns
Forward Looking Targets
2020 Pro Forma Outlook
Note: 2020 Pro Forma Outlook reflects Lyrica US LOE and China Volume Based ProcurementNote: Based on historic exchange rates, potential divestitures not included
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+Today’s Competitive Landscape
Source: Company filings, CapIQ1 Pfizer 2020E Revenue does not adjust for this transaction, the GSK/Pfizer Consumer JV and includes Upjohn Revenue.2 2020 Pro Forma Outlook Revenue.3 Wall Street consensus 2020E EBITDA margin. Figures adjusted to reflect 2020E calendar year. Consensus estimates are not internal estimates.4 2020 EBITDA margin including phased-in synergies.5 Includes revenues from consolidated sub Taro.6 Average gross leverage multiples of large cap pharma and spec pharma / Generics, excl. Sandoz, peer groups respectively. Consensus estimates are not internal estimates.7 Represents target payout ratio of free cash flow for NewCo.
$54 1
$49 $43
$24 $23 $17
$10 $55 $5 $3 $2
Avg. Gross Debt / 2020E
EBITDA6
Selected Spec Pharma / GenericsSelected Large Cap Pharma
~2x ~5x
The Opportunity
≤ 2.5xTarget by the end of 2021
NewCo2
Global leader with diverse,
differentiated and durable product
portfolio
$19 - $20bn
2020
E W
orld
wid
e Sa
les
($bn
)
Pays Dividend
25%7
2020EEBITDA Margin3
48% 56%34% 32% 36% 28% NA 23% 20%~40%2,4 45% 31%
NA
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Balanced geographic presence
A leader in the world’s growth markets
Durable EBITDA margin profile
Solid investment grade profile and balance sheet
Enhanced and sustainable cash flow
A Unique Company –No Direct Pharma Peer Set
Substantial dividend
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Enhanced Global Scale and Geographic Reach
Sustainable, Diverse and Differentiated Portfolio and Pipeline
Powerful Combination of Best-in-Class Capabilities with World Class Management Team
Strong and Sustainable Cash Flows with Attractive Shareholder Returns
Combination Highlights
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+Regionally Balanced Revenue Footprint2020E Pro Forma Revenue Mix Outlook by Geography
Note: NA = North America; Asia Pacific includes Japan, China and Australia
Developed Markets
(NA & EU)~75%
AsiaPacific~10%
Emerging Markets
~15%
Powerful Footprint Across The World’s Growth Markets
NewCo
Developed Markets
(NA & EU)~30%
Asia Pacific~55%
Emerging Markets
~15%Developed
Markets (NA & EU)
~55%
Asia Pacific~30%
Emerging Markets
~15%
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+Diversification Across Product Categories2020E Pro Forma Revenue Mix Outlook by Product Type
Sustainable, Diverse And Differentiated Portfolio
US Gx7%
Rx93%
US Gx20%
Ex-US Gx32%
Rx33%
OTC9%
Biologics6%
US Gx15%
Ex-US Gx19%
Rx56%
OTC6%
Biologics4%
NewCo
Note: Rx = Brands; Gx = Generics; OTC = Over-the-Counter
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+NewCo’s Geographic Opportunities
API110%
ARV2
25%
BRIMT25%
Other40%China
40%
Japan35%
Other25%
Cou
ntrie
sB
rand
s Upj
ohn
Myl
an
Asia Pacific (~30%)
Emerging Markets (~15%)
Developed Markets (NA & EU) (~55%)
United States45%
EU535%
Other20%
Majority is Sub-Saharan Africa
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Opportunity to Bring Mylan Growth Products to Upjohn Growth Markets
2020E Pro Forma Revenue Mix Outlook by Geography
1 Stands for Active Pharmaceutical Ingredient.2 Stands for Antiretroviral.3 Stands for Brazil, Russia, India, Mexico, Turkey. 4 Includes UK, Spain, Germany, France, Italy.
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+Strong Diversified Pipeline
Note: Trademarks are the property of their respective owners. Pipeline as of May 20191 RLD = Reference Listed Drug.2 OSD = Oral Solid Dosage.3 TDS = Transdermal Drug Delivery Systems.
Targeting ~$3bn in New Revenue from Products Expected to Launch by 2023~2/3 Will be Complex Gx, Biosimilars and Global Key Brands
OSD2
Sterileproducts
Topicals/TDS3
Biosimilars and Insulins
Respiratory
Notable Approvals Notable Pipeline (RLD1)
(Copaxone)
(Suboxone)(Estrace)
(Neulasta) (Lantus) (Herceptin)
Mesalamine(Canasa)
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Enhanced Global Scale and Geographic Reach
Sustainable, Diverse and Differentiated Portfolio and Pipeline
Powerful Combination of Best-in-Class Capabilities with World Class Management Team
Strong and Sustainable Cash Flows with Attractive Shareholder Returns
Combination Highlights
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Powerful Commercial Presence Drives Global Growth
Extensive Commercial Reach and Leading Position in Key Growth Markets
Combined Talent from Both Companies
Strong Platform and Partnership Network Protect Brand Value and Maximize Pipeline Potential
Opportunity to Cross Pollinate Across Portfolios
Unique Capabilities in Brand Building and Tendering / Contracting
Countries Served
~3,000Brands andMolecules
~15,000CommercialColleagues
60,000+Customers Shipped to
Globally
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+Best-in-class Manufacturing and Supply Network
Mylan
Upjohn
Morgantown, WV
Somerset, NJ
St. Albans, VT
Rockford, IL
San Antonio, TX (3)
Sugar Land, TX
Caguas, Puerto Rico
Warsaw, Poland
Galway, Ireland
Dublin, Ireland (3)
Chatillon, France
Merignac, France
Meyzieu, France
Confienza, Italy
Komarom, Hungary
Troisdorf, Germany
Zambia
South Africa
Katsuyama, Japan
Carole Park, Australia
Nashik, India
Aurangabad, India
Ahmedabad, India
Sarigam, India
Bangalore, India (4)
Hosur, India
Jadcherla, India
Jaggaiahpet, India
Multiple Cities, India (7)Hyderabad (3), Vizag (3), Mumbai (1)
Indore, India
Barceloneta & Vega Baja, Puerto Rico
Little Island, Ireland
Algiers, Algeria
Cairo, Egypt
Istanbul, Turkey Dalian, China
Tuas, Singapore
25 OSDSites 7 Injectable
Sites 8Complex Dosage
Form Sites11 API
Sites >80bnDoses
Produced Annually
165+ Countries Served
Manufacturing Site Locations
Global network of 51 sites serving >60,000 customers
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Enhanced Global Scale and Geographic Reach
Sustainable, Diverse and Differentiated Portfolio and Pipeline
Powerful Combination of Best-in-Class Capabilities with World Class Management Team
Strong and Sustainable Cash Flows with Attractive Shareholder Returns
Combination Highlights
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Expected Pro Forma 2020 Revenue Expected Pro Forma 2020 Adjusted EBITDA
NewCo
Revenue and EBITDA Contributions
NewCoSynergies
$12 - 12.5
$7.5 - 8 $19 - 20 $3.8 - 4.1
$3.5 - 3.7
$7.5 - 8.0
Note: 2020 Pro Forma Outlook reflects Lyrica US LOE and China Volume Based Procurement
~$0.25
$ in billions
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+Significant Operational Efficiencies
Significant Cost Synergies of at Least $1bn Annually Anticipated by 2023Expected to Further Enhance Existing Combined EBITDA and Cash Flows
Estimated Annual Cost Savings Post-Close ($mm)
~$250
~$500
~$750
~$1,000
Year 1 Year 2 Year 3 Year 4
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$19 –20bn
Financial Outlook
Near-term: Modest revenue growth as organic volume growth is offset by pricing pressure
Longer-term: Accelerating pipeline delivery to drive moderate growthExpected
Revenue
1 Reflects the impact of phased synergies.
Moderate Growth in the Mid toLong Term
$7.5 –8.0bn
Expected AdjustedEBITDA
~40% EBITDA Margin1 with Potential for Improvement
over Time
Near-term: Realization of cost synergies
Longer-term: Moderate revenue growth flowing through to EBITDA
2020 Pro Forma Outlook Forward Commentary
Note: 2020 Pro Forma Outlook reflects Lyrica US LOE and China Volume Based ProcurementNote: Based on historic exchange rates, potential divestitures not included
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≤ 2.5x
Financial Outlook (Cont’d)
Near-term: Significant cash flows support repayment of scheduled 2020-21 debt maturities
Long-term: Continue to target leverage ≤ 2.5x
Gross Leverage Target
Targeted by the End of 2021
≥ 25%of Free Cash Flow
to Be Paid as Dividend
Potential for Dividend Growth
and Share Repurchases
Near-term: Initiate dividend 1st quarter after close
Long-term: Commitment to maintaining solid investment grade rating, with sustained leverage ≤ 2.5x and potential for share repurchases and dividend increases, thereafter
Other Targets Forward Commentary
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+Key Takeaways
Relentless Focus on Total Shareholder Returns
Strong and Sustainable Cash Flows with Attractive Shareholder Returns
Powerful Combination of Best-in-Class Capabilities
Sustainable, Diverse and Differentiated Portfolio and Pipeline
Enhanced Global Scale and Geographic Reach
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Comments byPfizer on RemainCo
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+Innovation-Focused Leader
~$40 bnExpected 2020 Revenue
base
Combined Dividend to Pfizer Shareholders Expected to Equal Pfizer’s Dividend Immediately Prior to Closing1
$11 – 12bnAnticipated Operating
Cash Flow first full year post-close
Mid 30s% Expected Income Before Taxes (IBT)
Margin
Following Closing Pfizer Maintains Significant Financial Strength With Potential for Enhanced Growth Off of a Smaller Base
1 In the event the distribution is structured as a spin-off and based on combined dividend resulting from combination of continued Pfizer ownership and 57% equity ownership of NewCo.
• 5-year revenue CAGR expected to be stronger• Revenue growth expected to start immediately post-closing • Revenue growth expected to be more sustainable as the revenue base will be
smaller• Continued leverage to adjusted diluted EPS growth
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A New Champion for Global Health
Questions & Answers
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